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M&A Activity Picking Up: Investment Banker

Tuesday, 28 Feb 2012 | 1:29 AM ET

M&A activity is picking up and remains an effective way to add shareholder value, Anthony Fry, chairman at Espirito Santo Investment Bank, told CNBC.

“We certainly at the moment on the mergers and acquisitions side believe there is more activity going on beneath the surface than we’ve seen for two or three years,” Fry said.

He rejected suggestions that improved buyback schemes and increased dividends were far more effective at adding shareholder value and he blamed academia and the media for perpetuating such a “myth”.

“This is one of the great myths often pedaled by academics in particular and then regurgitated by commentators on television,” he said. Some market-watchers disagree about dividend and buyback's potential for return on investment, but Fry insisted otherwise.

Fry said that commentators highlight the few deals that go "horribly wrong."

"[They are] used as the benchmarks for saying M&A destroys shareholder value… lots and lots of M&A activity creates a massive amount of shareholder value,” he added.

Fry explained that deals fall through due to a lack of communication or cohesion between company management and shareholders, who are much more likely to ask questions on the value of potential deals.

“Being able to fund a deal, you still have to explain it to the shareholders, and I think a lot of management teams in the last two to three years have suddenly worked out that no matter what you’re buying, where you’re buying it and how you’re funding it, you’ve got to keep the shareholders onside, you can’t afford to have battles with them,” he said.

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